Krugman As Cryptoskeptic
Aug. 1st, 2018 05:17 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
osewalrusSome years back, I observed that younger doctors were ecstatic about the use of iPads and other tablets with high quality cameras for medical uses. Older doctors hated them. Whenever I tried to explain why these devices made things easier and more efficient, older doctors would insit that they contributed NOTHING because all these things were already being done perfectly fine (usually by nurses and administrative assistants).
I think of that when I read Krugman's upcoming piece as a cryptocurrency skeptic.
https://www.nytimes.com/2018/07/31/opinion/transaction-costs-and-tethers-why-im-a-crypto-skeptic.html?rref=collection%2Fsectioncollection%2Fopinion-columnists
Now I am a cryptocurrency skeptic as well. At least for the short term. And some of the reasons Krugman gives are solid. But it's his question of "what problem does cryptocurrency solve" is fairly easy to answer if you have ever tried to process a credit card payment from the consumer or non-profit end. Basically, centralized gatekeeping of financial services makes life a real bitch for electronic payments.
Some of this is regulation that imposes high transaction cost. Krugman makes the unfortunate standard assumption that only those engaged in skulldudgery care about this. This is the economic equivalent of "if you have nothing to hide, why worry about government surveillance." But even if we set aside government regulation, the fact is that credit card processing is a fairly tight oligopoly, and major financial banking services are not much better.
So cryptocurrency does what Uber and AirBNB and other such services do. They lower transaction cost and decentralize the market. This doesn't make it wonderful. There are lots of problems with Uber and AirBNB in terms of their impact on real estate values, concerns about discrimination, privacy, sexual assault, and overall quality of service. But whether it is good or bad is not the question posed. The issue is "what problem does it solve?" The answer is "it makes something I want to do a lot more convenient and (at least initially) cheaper.
I'll also freely concede that cryptocurrency permitting this in theory is not the same as permitting in fact. We are seeing some big scalability issues with regard to ever-lengthening block chains. But there is a drive to solve these problems and economic reason to do so beyond techno-libertarian fantasies of eliminating the need for governments.
I think of that when I read Krugman's upcoming piece as a cryptocurrency skeptic.
https://www.nytimes.com/2018/07/31/opinion/transaction-costs-and-tethers-why-im-a-crypto-skeptic.html?rref=collection%2Fsectioncollection%2Fopinion-columnists
Now I am a cryptocurrency skeptic as well. At least for the short term. And some of the reasons Krugman gives are solid. But it's his question of "what problem does cryptocurrency solve" is fairly easy to answer if you have ever tried to process a credit card payment from the consumer or non-profit end. Basically, centralized gatekeeping of financial services makes life a real bitch for electronic payments.
Some of this is regulation that imposes high transaction cost. Krugman makes the unfortunate standard assumption that only those engaged in skulldudgery care about this. This is the economic equivalent of "if you have nothing to hide, why worry about government surveillance." But even if we set aside government regulation, the fact is that credit card processing is a fairly tight oligopoly, and major financial banking services are not much better.
So cryptocurrency does what Uber and AirBNB and other such services do. They lower transaction cost and decentralize the market. This doesn't make it wonderful. There are lots of problems with Uber and AirBNB in terms of their impact on real estate values, concerns about discrimination, privacy, sexual assault, and overall quality of service. But whether it is good or bad is not the question posed. The issue is "what problem does it solve?" The answer is "it makes something I want to do a lot more convenient and (at least initially) cheaper.
I'll also freely concede that cryptocurrency permitting this in theory is not the same as permitting in fact. We are seeing some big scalability issues with regard to ever-lengthening block chains. But there is a drive to solve these problems and economic reason to do so beyond techno-libertarian fantasies of eliminating the need for governments.
